CALIFORNIA / UC may divest from firms operating in Sudan / Study group is expected to recommend Thursday funds be pulled from 9 foreign companies to protest genocide in Darfur

Jim Doyle, Chronicle Staff Writer

Published 4:00 am, Wednesday, March 15, 2006

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CALIFORNIA / UC may divest from firms operating in Sudan / Study group is expected to recommend Thursday funds be pulled from 9 foreign companies to protest genocide in Darfur

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Soon after U.S. firms were ordered out of Sudan in the late 1990s by then-President Bill Clinton, foreign oil companies rushed in and began producing and exporting the African nation's vast reserves of crude oil. Other firms entered Sudan to build roadways, pipelines and dams.

The University of California's $4 billion foreign investment portfolio includes some of those companies. But this week, the university will decide whether to pull a portion of its investments out of Sudan because of the Arab-dominated government's campaign of genocide against non-Arabs in Sudan's Darfur region.

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A UC study group made up of top administrators, investment advisers and student representatives will recommend Thursday that the UC Board of Regents divest tens of millions of dollars of its holdings from nine foreign companies that do business in Sudan.

UC's likely candidates for divestment include firms based in China, Russia, India and Malaysia. At least three are publicly traded on the New York Stock Exchange.

The office of UC President Robert Dynes has recommended that the divestment proposal apply to not only direct holdings but also so-called index funds, which are analogous to mutual funds and a major investment tool for UC's foreign portfolio.

The divestment also would prohibit UC's future purchase of shares in the nine companies.

UC Senior Vice President Joe Mullinix told the regents in January that an independent research service had found that the university held $2.6 billion -- via direct stock holdings and indirect sources -- in about 75 companies linked to Sudan.

"If adopted, the study group's proposal will divest a non-trivial amount of money from the worst offenders doing business in Sudan," said Jason Miller, a UCSF graduate student and a member of the UC Sudan Study Group. "This is the precedent we would like to set for other universities."

In recent weeks, the UC study group examined the activities of dozens of foreign companies doing business in Sudan. Miller said the study group focused on "those companies that most substantially contribute to (Sudanese) government revenue while providing minimal benefit for the country's disaffected citizens."

Sudan's latest round of atrocities began in February 2003 after rebels in the Darfur provinces stepped up their attacks against military bases. The Sudanese government and Arab militias responded with such indiscriminate violence against civilians that the Bush administration in 2004 described the massacres as genocide.

Most U.S. firms were ordered out of Sudan by the Clinton administration in 1997, several years after the State Department concluded that Sudan was "a state sponsor of terrorism."

The proposed divestment would be more comprehensive than previous decisions taken by other universities such as Harvard, Yale, Brown, Amherst, Dartmouth and Stanford. The states of Illinois, New Jersey and Oregon have begun either divesting funds from Sudan or restricting investments in companies there.

"The UC treasurer and general counsel have both weighed in on the financial and legal aspects of possible divestment," said UC spokesman Trey Davis.

The nine firms earmarked for UC divestment include Oil & Natural Gas Co. Videsh, the publicly traded subsidiary of India's largest oil company. Also on the roster is the China Petroleum and Chemical Corp. and PetroChina Co. Ltd., which are both publicly traded subsidiaries of China's largest oil firms. The other firms include Sudan Telecom Co., Ltd., which is publicly traded; Videocon Industries Ltd., and Bharat Heavy Electricals Ltd., both of India; PECD Bhd., and Nam Fatt Co. Bhd., both of Malaysia; and Tatneft OAO of Russian, which has a history of trading Russian arms for Sudanese oil.

Dynes' office also has recommended that the university engage in discussions with four additional foreign companies that are doing business in Sudan. UC officials have not indicated whether the university has invested in those four firms.